Mortgage Uniform State Content 5 — Questions and Answers
Question 1: Which federal act established the Consumer Financial Protection Bureau (CFPB)?
- The SAFE Mortgage Licensing Act of 2008
- The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Correct answer)
- The Gramm-Leach-Bliley Act of 1999
- The Housing and Economic Recovery Act of 2008
Correct answer: The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
The Dodd-Frank Act of 2010 created the CFPB to consolidate consumer financial protection authority previously spread across multiple federal agencies.
Question 2: A mortgage loan originator receives a gift card from a title company after closing several loans with them. Under RESPA, this arrangement is:
- Permissible if the gift card value is under $50
- Prohibited as an unearned fee or kickback under Section 8 (Correct answer)
- Permissible if disclosed to the borrower at closing
- Allowed if the title company is an affiliated business
Correct answer: Prohibited as an unearned fee or kickback under Section 8
RESPA Section 8 prohibits any fee, kickback, or thing of value exchanged for referrals of settlement service business, regardless of dollar amount.
Question 3: Under the SAFE Act's continuing education requirements, a licensed MLO must complete how many hours of continuing education annually?
- 5 hours
- 8 hours (Correct answer)
- 12 hours
- 20 hours
Correct answer: 8 hours
The SAFE Act requires MLOs to complete a minimum of 8 hours of approved continuing education each year to maintain their license.
Question 4: Which of the following loan features characterizes a 'balloon payment mortgage'?
- The interest rate adjusts annually based on a market index
- A large lump-sum payment is due at the end of the loan term (Correct answer)
- The monthly payment decreases over the life of the loan
- The borrower may skip payments during financial hardship
Correct answer: A large lump-sum payment is due at the end of the loan term
A balloon payment mortgage requires a large final payment at the end of the term, often after a period of smaller regular payments.
Question 5: Under the Home Mortgage Disclosure Act (HMDA), what is the primary purpose of collecting and reporting loan data?
- To set maximum allowable interest rates by geographic area
- To help identify discriminatory lending patterns and determine whether lenders are serving their communities' housing needs (Correct answer)
- To calculate the maximum loan limits for conforming mortgages
- To monitor prepayment rates for mortgage-backed securities
Correct answer: To help identify discriminatory lending patterns and determine whether lenders are serving their communities' housing needs
HMDA data is used by regulators and the public to identify discriminatory lending practices and assess whether financial institutions are meeting community credit needs.
Question 6: When a loan applicant is a non-citizen permanent resident, how must a lender treat them under ECOA?
- The lender may require a larger down payment due to immigration status
- Immigration status may not be used as a basis for denying credit if the applicant is creditworthy (Correct answer)
- Non-citizen residents may be denied any government-backed loan programs
- The lender must require a U.S. co-signer for all loan amounts
Correct answer: Immigration status may not be used as a basis for denying credit if the applicant is creditworthy
ECOA prohibits discrimination based on national origin, and treating a creditworthy permanent resident differently than a citizen solely due to immigration status would violate this prohibition.
Question 7: An MLO's pre-licensure education requirement under the SAFE Act includes which mandatory topic?
- Advanced tax preparation strategies for homeowners
- Federal law and regulations, ethics, and nontraditional mortgage products (Correct answer)
- State-specific construction loan guidelines only
- Real estate appraisal methodology
Correct answer: Federal law and regulations, ethics, and nontraditional mortgage products
SAFE Act pre-licensure education must include federal mortgage law, ethics (including fraud, consumer protection, and fair lending), and nontraditional mortgage products.
Mortgage Uniform State Content 5
Which federal act established the Consumer Financial Protection Bureau (CFPB)?